Chapter 7 - Development and implementation of the Australian and New Zealand Industrial Classification 2006 (ANZSIC 2006)

INTRODUCTION

This article describes the joint project between the Australian Bureau of Statistics (ABS) and Statistics New Zealand to redevelop the Australian and New Zealand Standard Industrial Classification (ANZSIC). The revised classification – ANZSIC 2006 – was released in February 2006. The article also covers subsequent work by the ABS to implement ANZSIC 2006 in statistical collections.

WHAT ARE INDUSTRIAL CLASSIFICATIONS?

To use statistical information about businesses effectively, it is first necessary to organise

that information into categories suitable for economic analysis. An industry classification is one way of doing this. It provides a standard framework under which businesses carrying out similar productive activities can be grouped together, with each resulting group being referred to as an industry. The term 'industry' is used in its widest context, covering the full range of economic activities undertaken to produce both goods and services.

ANZSIC is a hierarchical classification comprising four levels – Divisions (the highest level of the classification), Subdivisions, Groups and Classes (the lowest level). At the divisional level, the main purpose is to provide a limited number of categories which will provide a broad overall picture of the economy while the subdivision, group and class levels provide increasingly detailed dissections of the broad categories.

In ANZSIC, each individual class is defined in terms of a specified range of activities. It is common for a business to engage in a range of activities wider than those designated as belonging to a particular class, and, when this occurs, the business is classified on the basis of its predominant activity. Each business unit is classified uniquely to one class so that only those units with the same predominant activity are brought together to form a class.

WHY ARE THEY IMPORTANT?

The concept of industry – and the classifications used to produce a wide range of statistics by industry – are fundamental parts of the economic statistics infrastructure. ANZSIC provides a means for the standardised collection, analysis, dissemination and production of economic data on an industry basis for Australia and New Zealand.

The ABS uses ANZSIC in most of its economic collections and for the compilation of the National Accounts, which are important for Australia's economic decision making. A wide range of users from government, academia and the private sector also use ANZSIC for financial, administrative, analytical and statistical purposes. Of particular importance is the use of ANZSIC by the Australian Taxation Office (ATO) to classify businesses to their industry of activity.

TABLE 7.1: HISTORY OF INDUSTRIAL CLASSIFICATIONS IN AUSTRALIA

1960's

The Commonwealth Bureau of Census and Statistics (now known as the ABS) drew together several distinct industrial classifications then in use in Australia to produce the first Australian Standard Industrial Classification (ASIC). The original 1969 edition of ASIC was based on the broader levels of the International Standard Industrial Classification of All Economic Activities (ISIC), with some modifications to allow for comparability with previously used classifications.

1978

The 1978 edition reflected an extensive review of the 1969 edition, involving a substantial program of empirical investigation and analytical work. Numerous changes were made, mainly affecting the definitions of individual industry classes.

1983

The 1983 edition was a partial revision and updated the 1978 edition in respect of the Transport and Storage industries.

1985

The ABS commenced a major review of ASIC. The principal objectives were:to improve the alignment with ISIC; to achieve a better balance by giving more attention to the services sector; and to take account of the effects of technological change and changes in the structure of industry generally since the previous edition.

1990

The possibility of Australia and New Zealand using a common industrial classification was first raised in 1990. As the two statistical agencies used similar principles to create their national industrial classifications, they were able to agree on the principles and strategies for development of a single classification to meet the requirements of both countries. A particular consideration was the need to update each country's classifications to align with ISIC Revision 3, issued in 1990.

1993

The first edition of the joint classification (ANZSIC) with Statistics New Zealand was released.

2000

The review of ANZSIC 1993 commenced in January 2000.

2006

ANZSIC 2006 was released to replace the 1993 edition.

CONCEPTUAL BASIS OF ANZSIC 2006

There were several broad objectives set for the ANZSIC review project as follows:

A CONTEMPORARY INDUSTRIAL CLASSIFICATION

Industrial classifications need to be periodically reviewed to ensure that they remain current and relevant, reflecting the changes that have occurred in the structure and composition of industry since the previous version, as well as satisfying emerging user requirements for industry data.

Since ANZSIC 1993 was developed, there had been significant changes in the structure, composition and organisation of industrial and business activities in Australia and New Zealand. New materials, technologies and production techniques had been adopted and some of these affected the way industry and businesses operate. Most importantly, whole new industries had emerged and needed to be included in the classification – including provision of Internet access services, Internet publishing and broadcasting, computer retailing and communication equipment manufacturing.

The requirements of users of industry statistics had also changed. In particular, users required better support for alternative industry views, that is, views of activities, such as tourism, that are not consistent with the standard concepts embodied in ANZSIC 1993 (for example, tourism involves a range of industries such as air transport, accommodation, rental cars, and retail).

A MORE CONSISTENT CONCEPT OF INDUSTRY

ANZSIC 1993 used a mixture of supply-and demand-side concepts in defining industries – that is, sometimes a distinction was made on the process of production or service (supply-side), sometimes it was made on the client of the product or service (demand-side). In some instances, this led to the classification prescribing different treatments for similar productive activities. The conceptual framework adopted for the development of ANZSIC 2006 uses supply-side based industry definitions and groupings.

ALIGNMENT WITH INTERNATIONAL STANDARDS

Aligning ANZSIC with international standards as far as possible maximises the comparability of Australian and New Zealand industry statistics with those of the rest of the world. ANZSIC 2006 aligns with the International Standard Industrial Classification of All Economic Activities (ISIC) and the North American Industry Classification System (NAICS) at the subdivision level as far as practicable.

ISIC was adopted by the United Nations in 1948 and is used as the international standard for guiding work on national industrial classifications. Revisions of ISIC were issued in 1958 (Rev. 1), 1968 (Rev. 2) and 1990 (Rev. 3). A minor update of ISIC Rev. 3 was issued in 2002 (Rev. 3.1). A major revision of ISIC is well advanced and is expected to be released in 2007 (Rev. 4).

ANZSIC 2006 has achieved comparability with ISIC to a greater extent than earlier industrial classifications. Australia and New Zealand had, for many years, endeavoured to align their industrial classifications with ISIC as far as possible. However, the degree of alignment able to be achieved was sometimes reduced by competing classification principles, for example, a different structure of Australian or New Zealand industry, or a lack of significance of some internationally recognised economic activities in the two economies.

NAICS is the industrial classification system used by Canada, Mexico and the United States. It follows the supply-based or production-oriented principle. The Information sector is one of the key features of NAICS 2002 and was used as a model for the new Information Media and Telecommunications Division in ANZSIC 2006.

OTHER PRINCIPLES

The development of ANZSIC 2006 applied a number of important principles normally followed in the development of industrial classifications or for statistical classifications generally.

In most instances, industry classes have been formed only if the activities they cover are economically significant in either Australia or New Zealand and the businesses classified to them are relatively homogeneous in terms of industrial activity. ANZSIC categories are mutually exclusive and comprehensive in their coverage of productive economic activities.

An example of the hierarchical classification structure is shown in the extract from ANZSIC 2006 below.

DIAGRAM 7.1 HIERARCHICAL CLASSIFICATION STRUCTURE USED IN ANZSIC 2006

COMMUNICATION PROGRAM FOR ANZSIC 2006

In the development of the detailed ANZSIC 2006 classification, there was extensive consultation with users of ANZSIC in Australia and New Zealand, including experts in industry structure. There will continue to be extensive communication with users as the new classification is introduced into ABS collections.

The main elements of the ABS communication strategies are as follows:

distinguishing stakeholders with different interests, namely: ABS stakeholders, the Australian Taxation Office, major Australian and international users of official industry statistics, ANZSIC structure users (organisations that use ANZSIC in their own systems), and Statistics New Zealand and other national statistical offices

holding seminars with a wide variety of external users during the ANZSIC 2006 development stage (both general and industry specific)

providing users with discussion papers (broadly at 1993 ANZSIC division level) outlining the reasons for the changes being made to ANZSIC

holding information sessions in each State and Territory to discuss implementation plans for ANZSIC 2006 (annually since 2004)

using the ABS web site to freely disseminate ANZSIC 2006 and associated support tools accessible via the ABS web site

preparing communication plans for all areas of ABS statistics affected by implementation of ANZSIC 2006, outlining consultation plans, a backcasting or bridging strategy for data series, and how the effects of the implementation will be conveyed to users, and

discussing ANZSIC 2006 at fora that the ABS uses to interact with key users including the Australian Statistics Advisory Council and the Economic Statistics User Group.

MAJOR CHANGES FROM ANZSIC 1993

ANZSIC 2006 is substantially changed from the 1993 edition, largely due to significant changes in the Australian and New Zealand economies in the intervening period. As the table below shows, there has been a considerable increase in the number of industries at each level of the hierarchy within the classification.

TABLE 7.1 COMPARISON OF NUMBER OF INDUSTRY CATEGORIES – ANZSIC 1993 AND 2006

ANZSIC 1993

ANZSIC 2006

Difference

Divisions

17

19

2

Subdivisions

53

86

33

Groups

158

214

56

Classes

465

506

41

Total

693

825

132

Changes at each level are summarised below.

DIVISIONS (E.G. A AGRICULTURE, FORESTRY AND FISHING)

The large and diverse Property and Business Services Division in ANZSIC 1993, together with some other services, has been rearranged into three new divisions: Rental, Hiring and Real Estate Services; Professional, Scientific and Technical Services; and Administrative and Support Services.

ANZSIC 2006 Division J Information Media and Telecommunications is a new division, which brings together activities from a number of ANZSIC 1993 divisions, including ANZSIC 1993 Division J Communication Services.

Several divisions were renamed to better reflect their composition or terminology in current usage. Other changes to division names were required as a result of the new structure.

SUBDIVISIONS (E.G. 01 AGRICULTURE)

The increase in the number of divisions resulted from a number of factors including:

improving the international comparability of the classification at this level

identifying groupings of economic activities with significantly different production functions, and

promoting some more economically significant industries to this level of the classification.

GROUPS (E.G. 01 FRUIT AND TREE NUT GROWING)

The major factors behind the substantial increase in the number of groups were:

flow on effects from the large increase in the number of ANZSIC subdivisions

formation of ANZSIC groups better aligned with ISIC

more homogeneous groupings of production functions, and

recognising some new groups with relatively high levels of economic significance.

CLASSES (E.G. 01 BERRY FRUIT GROWING)

The introduction of ANZSIC 2006 changes the lower levels of the classification by merging and deleting some existing ANZSIC 1993 classes and recognising some new classes and primary activities. Some primary activities have also been transferred out of ANZSIC 1993 classes and re-grouped according to production function similarities to form new classes in ANZSIC 2006.

SUPPORT TOOLS

ANZSIC 2006 has been developed with a focus on providing relevant support tools to enable as smooth a transition as possible from ANZSIC 1993 to the new classification. To this end, there have been several support tools developed, all of which are accessible via the ABS web site. These include:

web-based search function based on key words

class change tables

correspondence tables

index of primary activities

codes and titles, and

ANZSIC coder (able to be ordered via the ABS site).

IMPLEMENTATION OF ANZSIC 2006 IN THE ABS

The ABS learned some valuable lessons during the changeover from ASIC to ANZSIC 1993, and these have influenced both the strategies and governance arrangements that underpin the implementation program. A key component of the program, for example, is a stronger focus on assisting users to understand the changes introduced with the new classification and to better manage the impact on users of ABS data. A number of measures will be taken by the ABS to assist users through the implementation period, including publishing data on both ANZSIC 1993 and 2006 bases and backcasting of selected ABS statistics on an ANZSIC 2006 basis.

CHANGE MANAGEMENT STRATEGIES

Annual, quarterly and monthly economic collections

In the past, the ABS has used a one point in time measurement of the effect of changes such as the introduction of a new industry classification. However, analysis of statistical time series focuses on movements in the data, and a single point–in–time approach does not allow for sufficiently robust analysis of these movements.

As a result, for economic collections conducted on an annual, quarterly or monthly basis, the ABS will measure the effect of the changeover from ANZSIC 1993 to ANZSIC 2006 in successive reference periods (two periods for annual collections, up to five for monthly or quarterly collections). Adoption of this approach, while extending the implementation process, will provide information about the impact of the change on estimates of both level and movement, and will result in the production of more robust statistics when they are first released on an ANZSIC 2006 basis.

Other economic collections

For the 2005–06 and 2006–07 reference years, irregular and benchmark economic collections (for example, Service Industry Surveys, the 2005–06 Retail and Wholesale Industry surveys, and the 2005–06 Agriculture Census) will be designed to produce official statistics on both ANZSIC 1993 and ANZSIC 2006 bases. The former will allow comparisons to be made with previous data for the topic concerned, while the latter will allow for comparisons into the future.

Population and social statistics

Collections that do not draw a survey frame from the ABS business register (such as the Census of Population and Housing and Labour Force Survey) will code their industry– related data to both ANZSIC 1993 and ANZSIC 2006. Generally, the industry data for these collections comprises only one topic amongst a wide range of data collected.

The 5-yearly Census held in August 2006 will be the first major collection to use ANZSIC 2006. ANZSIC is used in the census to provide information on employment by industry. The collection of this information for the 2006 Census will be aided by the use of a Business Name Index which lists most Australian businesses, including most large businesses. This should result in more accurate industry of employment coding than in previous censuses.

BROAD IMPLEMENTATION TIMETABLE

The ABS' implementation of ANZSIC 2006 has been devised taking into account two critically important elements. Firstly, establishing the requirements, including timing, of implementation within the Australian National Accounts (ANA), and, secondly, a determination not to release indicator series on a different classification basis to the ANA.

The optimal time for the ANA to be first released on an ANZSIC 2006 basis is late 2009. The ANA timetable will see ANZSIC 2006 based:

2008–09 Australian System of National Accounts and the 2008–09 State Accounts released in November 2009

2009 September quarter National Income, Expenditure and Product released in December 2009

2008–09 Tourism Satellite Accounts released in April 2010, and

2005–06 Input–Output Tables released in 2010.

ABS economic statistics that are used as time–series indicators in the compilation of the ANA will be released on an ANZSIC 2006 basis according to the following guidelines:

the first release for annual collections will be in respect of the 2006–07 reference year, and,

the first release of sub–annual collections will be in respect of the July 2009 reference month or the September 2009 reference quarter.

The timing of the program, while long, is necessary if the ABS is to make a well–managed transition to the new classification. It permits:

a detailed comparison of the economic structures implied by the revised classification

construction of ANZSIC 2006 based price indexes

sufficient time (and length of time–series) to undertake activities such as seasonal re–analysis

sufficient lead time for all ANZSIC structural users to have the necessary systems changes in place, and

separation (for some affected areas) from the planned introduction of the updated Australian and New Zealand Standard Classification of Occupation in 2006.

Before ANZSIC 2006 can be introduced into ABS' economic collections, it first needs to be included on the ABS Business Register. This was done with the assistance of the Australian Taxation Office, and the process is described in the box below.

The release of ABS statistics on an ANZSIC 2006 basis will start in late 2006 with the release of data from the August 2006 Labour Force Survey. At this time, industry employment statistics will be available for both ANZSIC 1993 and ANZSIC 2006. When backcasting required to provide consistent historical series is completed in early 2009, the compilation of ANZSIC 1993 industry employment statistics will cease.

The next ABS statistics available on an ANZSIC 2006 basis will be the 2006 Census with a release in late 2007
.Information on the planned first-release dates for a range of other statistical series on an ANZSIC 2006 basis can be found in Information Paper: ANZSIC 2006 Implementation (cat. no. 1295.0).

USE OF ANZSIC ON THE ABS BUSINESS REGISTER

Most economic survey areas within the ABS make survey selections of businesses from a population frame which is created from the ABS Business Register (ABSBR). The ANZSIC code on the ABSBR is used to determine whether units are in scope of certain surveys and generally also determines how data provided by those units are classified to industry for output purposes. The standard of ANZSIC coding on the ABSBR is therefore very important for the quality of industry data produced by the ABS.

The ABSBR consists of two populations:

Business units sourced directly from the Australian Business Register (ABR), which was established by the Australian Taxation Office (ATO) in 2000 as part of the 'The New Taxation System'. The ABR is the central repository for information about Australian businesses, including each entity's Australian Business Number (ABN).

A small – but economically significant – proportion of businesses that are members of large and/or diverse groups. The information held on the ABR for these units is not suitable for ABS statistical needs so new business units are created and maintained by the ABS in consultation with the business.

ALLOCATING ANZSIC CODES ON THE ABR

Once a business registers for an ABN, the business details from the application are added to the ABR. Included among business details stored on the ABR are the client's description of their primary activity (e.g. shoe retailing, smash repairs) and main industry type (e.g. agriculture, construction).

The ATO undertakes ANZSIC coding for all these new business registrations according to standards agreed with the ABS. The coding is quality assured by both the ATO and the ABS. An extract of the ABR is sent to the ABS' Business Register Unit every month and the required records are incorporated into the ABSBR.

CONVERTING FROM ANZSIC 1 TO ANZSIC 2006

By May 2006, the ATO had completed converting the ANZSIC 1993 codes attached to each ABN on the ABR to ANZSIC 2006 codes. Recoding of ABS maintained population units was completed in December 2005.

To support the statistical strategies outlined above for economic collections, the ABSBR will carry both ANZSIC 1993 and ANZSIC 2006 codes from mid 2006 until June 2009. The majority of ANZSIC 2006 codes will be sourced from the ABR, making the ATO's ANZSIC 2006 implementation project an extremely important one for the ABS.

REFERENCE

ANZSIC 'home page' on the ABS Web site (providing access to the classification as well as various support tools including an on-line search facility).